| Income Taxes | 11. Income Taxes Domestic and international pre-tax loss consists of the following:
December 31,
2023 2022
United States (22,812,381 ) (19,236,289 )
International 1,150 (220 )
Loss before income taxes (22,811,231 ) (19,236,509 ) For the years ended December 31, 2023 and 2022, income tax expense
attributable to operations is immaterial. Income tax expense differed from the amount computed
by applying the federal statutory income tax rate of 21% to pretax income for the years ended December 31, 2023 and 2022 as a result
of the following:
December 31,
2023 2022
Federal tax at statutory rate $ (4,790,600 ) $ (4,039,453 )
State income taxes (815,249 ) (415,015 )
Stock based compensation 276,371 204,047
Foreign taxes - -
Tax credits (1,071,338 ) (673,881 )
Nondeductible items (142,058 ) 22,081
Valuation allowance 5,517,860 4,516,446
Deferred true up 1,320,182 -
Rate change (247,773 ) 369,874
Other items (47,395 ) 15,901
Total $ - $ - Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income
tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2023 and 2022 are as following:
December 31,
2023 2022
Deferred tax assets:
Net operating loss carryforwards $ 32,935,845 $ 30,186,203
Research and development credits 5,938,775 4,867,437
Intangibles 1,192,900 1,303,262
Fixed assets 67,200 61,295
Stock based compensation 410,323 654,860
Accruals and reserves 146,482 69,486
Lease liability 245,790 87,233
Capitalized research costs 3,905,973 1,969,682
Other 6,876 1,496
Gross deferred tax assets 44,850,164 39,200,954
Valuation allowance (44,606,284 ) (39,088,423 )
Total deferred tax assets 243,880 112,531
Deferred tax liabilities:
Right of use asset (243,880 ) (85,975 )
Deferred project costs - (26,556 )
Total deferred tax liabilities (243,880 ) (112,531 )
Net deferred tax assets $ - - Management regularly assesses the ability to
realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and
expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to
the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision
for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of
factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the
year ended December 31, 2023, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets.
The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was an increase of $5,517,861 and $4,516,446,
respectively. As of December 31, 2023, the Company had net operating
loss carryforwards for federal and state income tax purposes of approximately $119,789,248 and $116,634,520, respectively, which will
begin to expire in 2034 with $84,452,051 of our federal net operating loss carryforward lasting indefinitely. As of December 31, 2023, the Company had federal
and state research credit carryforwards of approximately $5,870,310 and $3,308,423, respectively. The federal research credit carryforwards
will begin to expire in 2033 while the California research credits carry forward have an indefinite life. The Internal Revenue Code of 1986, as amended,
imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly,
a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC
Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one
year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal
and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the
IRC Section 382 and similar state provisions. Effective for tax years beginning after December
31, 2021, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires
taxpayers to amortize such costs over a period of five or fifteen years. While it is possible that Congress may modify, defer, or repeal
such provision, we have no assurance that the provision will be modified, deferred or repealed. This legislation has accelerated the utilization
of our net operating losses in the U.S., but it has not impacted our current tax obligations. In response to the
COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, and the Consolidated Appropriations Act, 2021
were passed into law and provide additional economic stimulus to address the impact of the COVID-19 pandemic, including among other items,
several U.S. income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications
to interest expense limitations, and an option to defer payroll tax payments for a limited period. In 2023, we assessed our eligibility
to claim a refund of employer taxes available under the provisions of the
CARES Act. For the years ended December 31, 2023, we calculated eligible credits of approximately $763,624 provided by the CARES Act,
which have been recognized as offsets to salaries costs in operating expenses. As of December 31, 2023, the aggregate eligible credit
amount has been accrued as a receivable on our consolidated balance sheets. The following table reflects changes in gross
unrecognized tax benefits:
December 31,
2023 2022
Balance at beginning of year $ 2,086,044 $ 1,797,238
Increase in balance related to tax positions taken during the current year 459,145 288,806
Increase in balance related to tax positions taken during prior years - -
Decrease in balance related to prior year tax positions - -
Decrease in balance related to settlement with tax authorities - -
Balance at end of year $ 2,545,189 $ 2,086,044 As of December 31, 2023, $2,545,189 of the total
unrecognized tax benefits, if recognized, would have an impact on the Company's effective tax rate. The Company estimates that there will
be no material changes in its uncertain tax positions in the next 12 months. The Company's has not recorded any interest or penalties
related to its unrecognized tax benefits for 2023 or 2022. The Company files income tax returns in the U.S. federal and various
state jurisdictions with varying statutes of limitations. The Company is generally no longer subject to tax examinations for years prior
to 2020 for federal purposes and 2019 for state purposes, except in certain limited circumstances. However, due to the fact that the Company had
loss and credits carried forward in some jurisdictions, certain items attributable to technically closed years are still subject to adjustment
by the relevant taxing authority through an adjustment to tax attributes carried forward to open years. |
